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Iraqi PM replaces Central Bank governor in midst of economic crisis
While the weakening of Iraq's dinar falls in the spectrum of a rising US dollar, sanctions targeting Iraqi banks and restrictions on transfers have exacerbated the problem
By News Desk - January 23 2023
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(Photo Credit: AP)

Iraq’s Prime Minister, Mohamed Shia al-Sudani, dismissed on 23 January the governor of the Iraqi Central Bank after issuing a series of measures to try to stabilize the exchange rate between the dinar and the dollar in the midst of a severe economic crisis.

According to reports by the Iraqi television network Al-Sumaria, the prime minister has appointed Ali Mohsen al-Alaq to replace Mustafa Majaif as head of the Central Bank of Iraq.

He has also appointed Bilal al-Hamdani as the new head of the Commercial Bank of Iraq after ordering the early retirement of Salem Jauad al-Chalabi. The Iraqi PM has promised to stabilize the country’s economic situation.

Meanwhile, Iraqi Foreign Minister Fuad Hussein said in statements to Rudaw news that an official delegation will visit the United States in February to discuss the fluctuations in the exchange rate with the dollar.

The Central Bank of Iraq announced in December 2020 a devaluation of the currency to address the economic crisis, although the depreciation of the dinar was a blow to the population, which faced an increase in costs for food and other necessary goods.

The dinar hit new lows on 20 January, reaching about 1,670 to the dollar. The currency has lost nearly 7 percent of its value since mid-November. The official rate stands at 1,470 dinars to the dollar.

The drop comes at a time when Iraq’s foreign currency reserves is at a record high of around $100 billion.

According to a column written by Zaher Mousa and published by The Cradle on 22 January, Iraq has been compelled to transfer all of its oil earnings to a single US bank account since 2003. Washington is using Iraq’s own dollars as a weapon by depreciating its currency and obstructing transactions.

The US has implemented several strict measures, including sanctions on Iraqi banks and the rationing of dollars. Rather than dissuade smuggling and fraud, the measures are only exacerbating Iraq’s economic crisis.

The recent crisis began with the imposition of sanctions by the US Treasury Department on three Iraqi banks owned by businessman Ali Muhammad Ghulam al-Ansari, followed by sanctions on 16 additional Iraqi banks. Another 23 banks remained operating as clients of the currency window in the Central Bank.

The case of Iraq offers conclusive proof that a nation’s economy and monetary policy suffer from dollar dependence, particularly one that is substantially dependent on hydrocarbon exports. The case for Iraq diversifying its commerce and using alternative currencies is stronger than ever, given the country’s history of political unrest and economic hardship.

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